◼ FINANCE Bloomberg Businessweek September 16, 201925MULLER:CHRISMORGAN
THE BOTTOM LINE In Muller’s day job, he’s kind of a big deal. But
the quanitative money manager has taken his music on the road
and learned how to play for strangers.to holding U.S. cash,” says fund manager Kenneth
Orchard. “You do pick up yield holding Japanese
T-bills instead of holding U.S. government T-bills,
and that’s purely from the FX swap component.”
After protecting against currency swings, a three-
month Japanese bill yields 2.29%. That compares
with –0.12% unhedged, and 1.95% for a similarly
dated U.S. bill.
In Murphy’s view, removing the currency risk
allows him to diversify out of the U.S. bond market
and pick up yield without wading into riskier assets.
That will be important, he says, as shifting Fed
policy and ever-e scalating trade tensions between
the U.S. and China point to a turbulent stretch ahead
in Treasuries. —Katherine Greifeld● You probably can't invest in Pete Muller’s
funds. But you might be able to catch his actA Hedge Fund Guru
Strikes Up the Band
signals of future market moves, and their invest-
ment processes are closely guarded secrets.
Muller’s rock- and soul-tinged music isn’t
so cryptic. Near the end of his New York set, he
covered the 1984 pop hit Missing You by John Waite.
His voice and conversational singing style call to
mind ’70s folk singer Steve Goodman. He sings
about vulnerability in relationships and saying
goodbye to his dying mother for the last time. The
video for Muller’s song Let You In has 108,000 views
on YouTube. It’s not Billy Joel numbers, but can the
Piano Man design a statistical arbitrage algorithm?
Muller quit classical piano at age 15 only to take
up jazz a few months later. After earning a math
degree from Princeton, he ended up in Marin
County, Calif., composing music for a rhythmic
gymnastics team for a while. His current musi-
cal incarnation is rooted in a sabbatical he took
from Morgan Stanley in the early 2000s. “In 2005
I made a record and distributed 100 copies to
friends,” he says. “I’m still trying to track down
all the copies and burn them.” To improve, he
hosted a weekly songwriting workshop with fellow
musicians in his downtown New York loft.
Muller is tight-lipped about anything related
to PDT but says his different interests fit together.
When building a model, “you always want to
express an idea as elegantly as possible,” he says.
“And it’s the same with music.” �Richard Dewey (A
freelance contributor, Dewey is a portfolio manager at
Royal Bridge Capital, a New York-based hedge fund.)Joe’s Pub in New York’s East Village might not reg-
ister as a usual hangout for the Wall Street crowd,
but on one night in May, you’d have thought
it advertised “Quants drink free” on the CNBC
crawler an hour before the close. They came to
hear singer- songwriter Pete Muller, who was play-
ing at Joe’s to support Dissolve, his fourth studio
album. Muller also happens to be a founding father
of the modern quantitative hedge fund.
The audience isn’t always this warmed up.
Muller, who sings and plays piano, had just
returned from a cross-country tour opening for
singer-songwriter Stephen Kellogg in places includ-
ing Charleston, W.Va., and Spokane, Wash. “My
wife said, ‘If you want real feedback, you’ve got to
get out and play for strangers,’ ” Muller says.
This isn’t a man who needs to spend time
gigging in a Spokane bar to pay the rent. Ask
around the hedge fund industry, and people
speak in awed tones about Muller’s returns over
his 26-year career as head of PDT Partners, a
hedge fund spun out of Morgan Stanley in 2013.
Successful quants have a mystique on Wall Street:
They use computers to comb through data for▲ Muller at a gig
in New JerseyTHE BOTTOM LINE Managers of dollar-based funds are gaining
an edge from currency deals, but that won’t last if U.S. interest rates
converge with those in the rest of the world.◼ FINANCE Bloomberg Businessweek September16, 201925MULLER:
CHRIS
MORGAN
THEBOTTOMLINE InMuller’sdayjob,he’skindofa bigdeal.But
the quanitative money manager has taken his music on the road
and learned how to play for strangers.to holding U.S. cash,” says fund manager Kenneth
Orchard.“YoudopickupyieldholdingJapanese
T-billsinsteadofholdingU.S.governmentT-bills,
andthat’spurelyfromtheFXswap component.”
After protecting against currency swings, a three-
month Japanese bill yields 2.29%. That compares
with –0.12% unhedged, and 1.95% for a similarly
datedU.S.bill.
InMurphy’sview,removingthecurrencyrisk
allowshimtodiversifyoutoftheU.S.bondmarket
andpickupyieldwithoutwadingintoriskierassets.
Thatwillbeimportant,hesays,asshiftingFed
policyandever-escalatingtradetensions between
the U.S. and China point to a turbulent stretch ahead
inTreasuries.—KatherineGreifeld● You probably can't invest in Pete Muller’s
funds. But you might be able to catch his actA Hedge Fund Guru
Strikes Up the Band
signals of future market moves, and their invest-
ment processes are closely guarded secrets.
Muller’s rock- and soul-tingedmusic isn’t
socryptic.NeartheendofhisNewYorkset,he
covered the 1984 pop hit Missing You by John Waite.
His voice and conversational singing style call to
mind ’70s folk singer Steve Goodman. He sings
about vulnerability in relationships and saying
goodbyetohisdyingmotherforthelasttime.The
videoforMuller’ssongLetYouInhas108,000views
onYouTube.It’snotBillyJoelnumbers,butcanthe
PianoMandesigna statisticalarbitragealgorithm?
Mullerquitclassicalpianoatage 15 onlytotake
upjazza fewmonthslater.Afterearninga math
degreefromPrinceton,heendedupinMarin
County,Calif.,composingmusicfora rhythmic
gymnasticsteamfora while.Hiscurrentmusi-
calincarnationisrootedina sabbaticalhetook
fromMorganStanleyintheearly2000s.“In 2005
I madea recordanddistributed 100 copiesto
friends,”hesays.“I’mstilltryingtotrackdown
allthecopiesandburnthem.”Toimprove,he
hosteda weeklysongwritingworkshopwithfellow
musicians in his downtown New York loft.
Muller is tight-lipped about anything related
to PDT but says his different interests fit together.
When building a model, “you always want to
express an idea as elegantly as possible,” he says.
“And it’s the same with music.” �Richard Dewey (A
freelance contributor, Dewey is a portfolio manager at
Royal Bridge Capital, a New York-based hedge fund.)Joe’s Pub in New York’s East Village might not reg-
isterasa usualhangoutfortheWallStreetcrowd,
butononenight inMay,you’dhavethought
itadvertised“Quantsdrinkfree”ontheCNBC
crawleranhourbeforetheclose.Theycameto
hearsinger-songwriter Pete Muller, who was play-
ing at Joe’s to support Dissolve, his fourth studio
album. Muller also happens to be a founding father
of the modern quantitative hedge fund.
The audience isn’t always this warmed up.
Muller, who sings and plays piano, had just
returned from a cross-country tour opening for
singer-songwriter Stephen Kellogg in places includ-
ing Charleston, W.Va., and Spokane, Wash. “My
wife said, ‘If you want real feedback, you’ve got to
getoutandplayforstrangers,’” Mullersays.
Thisisn’ta manwhoneedstospendtime
gigging in a Spokane bar to pay the rent. Ask
around the hedge fund industry, and people
speak in awed tones about Muller’s returns over
his 26-year career as head of PDT Partners, a
hedge fund spun out of Morgan Stanley in 2013.
Successful quants have a mystique on Wall Street:
They use computers to comb through data for▲ Muller at a gig
in New JerseyTHE BOTTOM LINE Managers of dollar-based funds are gaining
an edge from currency deals, but that won’t last if U.S. interest rates
converge with those in the rest of the world.